Buildouts put the "fun" in contingency funds 💰

We talked the other week about the critical role that project managers play in the buildout process protecting your budget, timeline, and sanity. You absolutely must have an experienced, professional buildout team if you want any hope of making it through in one piece. But even with the best teams in place, there are a host of unwelcome surprises along the way that can only be solved with history’s oldest salve: money.

Modifying any physical space – turning it from one look and use into another – is not a matter of imagination. It’s a very real process that’s ruled by physics and building code. 

So even in the best cases where the pre-lease construction due diligence has been duly done, test fits fitted, and budgets budgeted, there remain a whole host of unknowns that can only be assessed and addressed as they arise. And while these unknowns vary in their levels of seriousness and disruptiveness, they’re never free. Why? Because construction costs are always a function of time, labor, and materials.

So if construction is underway and surprise! physics says you can’t put a drain here, and building code says you can’t move it there, wherever you end up moving it means it’ll cost more – more time, more labor, and more pipe than what your GC had originally budgeted. All this means more money YOU end up paying.

Every surprise, every change, every are you effing kidding me moment ends up costing money. So as much as you need a project manager, your project manager needs YOU to have a healthy contingency fund of at least 10% of the entire buildout budget.

Errmerrgerd, Sheila! That’s $50,000 on top of my already $500,000 buildout budget. Yes, yes it is. 

Here are a few choice memories (among hundreds of wtf moments) from my buildouts that illustrate exactly why you need a big ol’ contingency bucket:

🚽 Upon GPR* scanning the floor to prepare for our plumbing penetrations, we learned that the large area where we needed to core drill was the exact location of the all electrical conduit connecting the electrical room to the elevator bank serving 24 floors. We had to redesign the entire back of house and switch from normal toilets to wall-hung toilets to run the pipes to where they could actually drain.

🥛 During the permitting process we learned that a certain** Maryland county’s wastewater requirements considered milk to be “grease,” and as such, our grease interceptor had to be about 10x larger than normal, plus it needed a secondary holding tank that was so large, six of me could fit inside standing up.***

☢️ Once again but on a different project, we learned that the GPR scan wasn’t going to be sufficient, because there was “so much junk” in the floor. Pipes, conduit, rebar, old concrete… So we had to X-Ray the floor, which is a whole thing. It has to be done at night (you know, so you don’t irradiate people), and all sorts of protective measures are required. THEN we learned that while the X-Ray was successful, we had to GPR again to confirm the depths of whatever showed up. So it was a lot more money and probably three months of debacle.

💧 Towards the end of a buildout, the electricians were installing the lights in an exterior but partially enclosed seating area. The great-looking sconces that the interior designer had specified and we had purchased were not going to pass inspection, because they were UL-rated “damp” (like for a bathroom), and code required that they be UL-rated “wet” like for full-on rain. Despite the fact that (a) it would never rain inside the enclosed area, and (b) an inspector can’t even see the rating sticker once the light is installed, I had to find replacements that could be on site in less than a week. Finding attractive, ready-to-ship sconces among the UL-wet options was like finding your lost earring back in Disneyland.

Now I could go on and on with examples, but that would get boring and terribly demoralizing. Also, I’m saving the worst of these stories for my memoir (or a couple cocktails, your choice). Just trust me when I say that your buildout will cost you more than you planned, and having access to more money is not optional. In fact, SBA lenders require that you have an extra 10% on your buildout budget, because they’ve seen some things, too.

Without question, construction costs will be higher than you planned, but whether or not those overruns cause lasting financial damage is not a given. This is exactly why in Dream Space we factor buildout contingency funds into every single Capital Budget.
 

* Ground Penetrating Radar
** Rhymes with Pontgomery Mounty
*** Proof in top left collage pic below